Q3 Earnings Preview: Merck, Ventas, Weyerhaeuser and Legg Mason

Q3 Earnings Preview: Merck, Ventas, Weyerhaeuser and Legg Mason

Today is a relatively light earnings day. We have third quarter previews for the big companies reporting before the opening bell. We split up the important companies into two separate articles, so readers should check out the article we posted five minutes ago for further Q3 previews. Below we preview, Merck & Co., Inc. (NYSE:MRK), Ventas, Inc. (NYSE:VTR), Weyerhaeuser Company (NYSE:WY), and Legg Mason, Inc. (NYSE:LM).

Q3 Earnings Preview: Merck, Ventas, Weyerhaeuser and Legg Mason

  • Merck & Co., Inc. (NYSE:MRK) will report its 3Q12 earnings on Friday morning at 7:00 am and host an investor conference call at 8:00 am.  Goldman Sachs analyst, Jami Rubin, expects MRK to report 3Q2012 EPS of $0.92 and full year 2012 EPS of $3.81 in line with consensus and near the mid-point of 2012 guidance ($3.75 – $3.85). She expects 3Q12 revenues of $11.7 billion relatively in-line with consensus at $11.6 billion, and full-year 2012 revenues of $47.8 bn slightly above consensus at $47.1 billion. In 3Q, Jamie expects an FX headwind of -4% to ex-US revenues. While she does not expect any surprises from 3Q, she expects the key focus to remain on expectations for timing and potential sales of pipeline products odanacatib and surorexant. Other key issues to watch for, color on the timing of top line data for Tredaptive HPS2-THRIVE, outlook for Victrelis (with potential updates for its pan-genotypic protease inhibitor, MK-5172), strength of Januvia franchise (Goldman forecasts 29% total growth yoy in 3Q, with sales reaching $4.3 bn for full year 2012), expected erosion curve for Singulair post August, and any appetite for M&A, business development priorities?
  • Ventas, Inc. (NYSE:VTR)  is scheduled to report 3Q results on Friday 10/26. Stifel Nicholas currently expects normalized FFO/share of $0.92 and FAD/share of $0.84. Consensus FFO is $0.93 (average) and $0.93 (median).  Ventas, Inc. (NYSE:VTR) has approximately 27% of NOI in senior housing operating assets (rather than traditional NNN leases) where income can fluctuate with property level operating performance. NICMAP industry data reported occupancy and rate up QoQ 17bps and 31bps respectively indicates a continuing recovery in senior housing occupancy and rate growth in third quarter that should signal at least in line results for Ventas, Inc. (NYSE:VTR).  Future Senior Housing Expectations Key – Should be important to hear management view of senior housing fundamentals going into 2013 and thoughts on potential for construction to increase in next 12-24 months. Continued improvement in senior housing fundamentals should enhance Ventas, Inc. (NYSE:VTR) growth in 2013. For the six months ended 30 June 2012, Ventas, Inc. (NYSE:VTR) revenues increased 90% to $1.19B. Net income increased 36% to $90.4M. Revenues reflect Senior Living Operations segment increase of 87% to $589.8M, Triple -Net Leased Properties segment increase of 81% to $417.2M, United States segment increase of 96% to $1.14B, Canada segment increase of 4% to $47.2M, FFO per Share (Diluted) increase of 42% to $0.81.
  • Weyerhaeuser Company (NYSE:WY) reports earnings before the opening bell. RBC Capital Markets recently upgraded WY. RBC believes Weyerhaeuser Company (NYSE:WY) shares’ are still discounting an overly conservative timberland acreage valuation and building product pricing outlook. In contrast, they are getting more bullish on log, lumber, and OSB pricing as housing recovers. RBC has aligned their US housing starts forecast with RBC Economics; this increases their 2013 starts assumption by 12%, from 825K to 922K. Weyerhaeuser Company (NYSE:WY) is trading at only 13.1x their 2013 EBITDA forecast of $1,350MM, a low multiple on a historical basis for this stage in the cycle. RBC is  forecasting Q3 EPS of $0.16 (consensus = $0.17) and EBITDA of $264MM. For the 26 weeks ended 30 June 2012, Weyerhaeuser Company (NYSE:WY) revenues increased 8% to $3.29B. Net income before extraordinary items increased 8% to $125M. Revenues reflect Wood Products segment increase of 25% to $1.41B, Real Estate and Related Assets segment increase of 23% to $433M. Net income also reflects Wood Products segment income totaling $13M vs. loss of $91M, Corporate and Other segment income totaled $18M.
  •  Legg Mason, Inc. (NYSE:LM)  will be announcing its September quarter earnings results on October 26, with an earnings call scheduled for 8:00am EST.  The street expects  Legg Mason, Inc. (NYSE:LM) to report Q3 EPS of $0.55 and $636.2 million in revenue. Based on the company’s preliminary September AUM figures, analysts estimate that Legg Mason experienced net outflows within its equity AUM in the September quarter, continuing a trend of net outflows within the equity AUM going back to June 2010. However, the company’s fixed income AUM likely experienced a net inflow in the quarter.  On September 11, the company announced that Mark Fetting would step down as CEO effective October 1, with Joseph Sullivan, an internal executive, stepping in as interim CEO.   Legg Mason, Inc. (NYSE:LM)based in Baltimore, MD is a holding company for select global asset management subsidiaries. As of September 2012, the company had approximately $651 billion of assets under management (AUM).  AUM at the end of September rose to $650.7 billion from $639.2 billion at the end of August and $631.8 billion at the end of June.  Fixed income AUM rose to $369.4 billion or 1.26% compared to 0.14% return for the Barclays US Aggregate Index.  Equity AUM rose to $153.4 billion due to positive market performance (~2.9% for S&P 500) from $151.2 billion at the end of August. Liquidity AUM increased $4.7 billion to $127.9 billion. For the three months ended 30 June 2012,  Legg Mason, Inc. (NYSE:LM) revenues decreased 12% to $630.7M. Net loss totaled $9.5M vs. income of $60M. Revenues reflect Funds decrease of 11% to $356.5M, Separate accounts decrease of 11% to $182.4M, Distribution and Service Fees decrease of 11% to $81.6M. Net loss reflects Other decrease from $3.4M (income) to $72.6M (expense), Income( expense ) of vechile investments decrease from $5.1M (income) to $4.1M (expense).

Disclosure: No position in any securities mentioned.

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